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Crown Castle (CCI) Surpasses Q1 FFO & Revenue Estimates

Zacks Equity Research

Crown Castle International Corp.’s CCI first-quarter 2019 adjusted funds from operations (AFFO) per share of $1.45 compares favorably with the prior-year figure of $1.36. Further, the figure surpassed the Zacks Consensus Estimate of $1.43.

Results reflect benefits from the company’s extensive tower portfolio, high demand for infrastructure and healthy leasing activity. The year-over-year increase in bottom line reflects growth in site rental revenues.

Net revenues for the reported quarter amounted to $1.43 billion and marked 9.8% year-over-year growth. Moreover, the reported figure outpaced the Zacks Consensus Estimate of $1.39 billion.

Site rental revenues came in at $1,219 million, up 6% year over year, which included organic growth, as well as contributions from straight-lined revenues. Particularly, site rental revenues during the January-March quarter recorded 5.7% organic growth, driven by strong new leasing activity, as well as contracted tenant escalations. Additionally, services and other revenues came in at $207 million, significantly up 41.8% year over year.

Operating Metrics

Quarterly operating income increased around 10% from the prior-year quarter to $384 million. However, operating expenses escalated 9.7% year over year to $1.04 billion. Quarterly adjusted EBITDA was approximately $821 million, representing year-over-year increase of 8%.

Cash Flow and Liquidity

Crown Castle exited first-quarter 2019 with cash and cash equivalents of $245 million, down from the $277 million reported at the end of 2018. Furthermore, as of Mar 31, 2019, the company generated around $512 million of net cash from operating activities compared with $452 million reported in the year-ago period.

Also, debt and other long-term obligations aggregated approximately $17.1 billion, up from $16.6 million witnessed at the end of 2018.

Dividend Payout

During the March-end quarter, Crown Castle paid common stock dividend of $1.125 per common share, up approximately 7% from the year-earlier quarter.

2019 Outlook

Crown Castle has reiterated its outlook for full-year 2019. The company expects site rental revenues of $4,939-$4,984 million. Adjusted EBITDA is anticipated in the band of $3,344-$3,389 million.

Meanwhile, FFO is anticipated in the $2,293-$2,338 million range, while AFFO is projected at $2,413-$2,458 million.

Our Take

Crown Castle has made immense efforts to build an unmatched portfolio of more than 40,000 towers and 70,000 route miles of high-capacity fiber in key U.S. markets. Such moves are a strategic fit for the company amid favorable industry fundamentals. Specifically, the deployment of 5G will likely drive growth on the company’s tower and small-cell assets as wireless carriers are increasing investments to enhance their networks in order to provide the coverage, capacity and speed needed to support mobile video, IoT and fixed wireless broadband. 

Nevertheless, escalating expenses and cut-throat competition in the wireless tower operator industry remain concerns for Crown Castle. In addition, consolidation in the wireless industry might reduce demand for cell-tower deployments and will likely impact the top line.

Crown Castle International Corporation Price, Consensus and EPS Surprise

Crown Castle International Corporation Price, Consensus and EPS Surprise | Crown Castle International Corporation Quote

Crown Castle currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like Cousins Properties Incorporated CUZ, Iron Mountain Incorporated IRM and Duke Realty Corporation DRE slated to report first-quarter numbers next week.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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